Monday, December 29, 2008

JC Flowers and Others Join in Bid for IndyMac

A consortium of private equity and hedge fund firms, including J.C. Flowers & Co, is close to a deal to buy the assets of failed mortgage lender IndyMac, a source familiar with the matter said on Sunday.

The prospective buyers also include Dune Capital Management, a private investment firm run by former Goldman Sachs executives, and hedge fund Paulson & Co, the source said.

The consortium would buy the bank and its 33 branches, IndyMac's reverse-mortgage unit and a $176 billion loan-servicing portfolio, the source said.

The presence of private equity and hedge fund firms comes after the FDIC said last month it was expanding the pool of qualified bidders to include those institutions that do not currently have a bank charter, although they must have conditional approval for a charter from the responsible agency.

The Federal Deposit Insurance Corp and IndyMac as well as the buyers in the consortium could not be immediately reached.

Last week IndyMac spokesman Evan Wagner said a deal was expected before the end of the year. The deadline for final bids for IndyMac's assets was December 15.

FDIC estimates IndyMac's failure cost the agency $8.9 billion. Barclays Capital and Deutsche Bank are advising the FDIC on the sale.

The mortgage specialist's IndyMac Bank unit was taken over by regulators after it failed on July 11 in one of the largest bank failures in U.S. history. At the time, it had $32 billion in assets and $19 billion in deposits.

IndyMac Bancorp, Inc., the holding company, filed for Chapter 7 protection soon after with the U.S. bankruptcy Court in Los Angeles, indicating it plans to liquidate.

Founded in 1985 by Angelo Mozilo and David Loeb, who also founded Countrywide Financial Corp, IndyMac once specialized in "Alt-A" home loans, which often didn't require borrowers to fully document income or assets. It collapsed after defaults mounted and as tight capital markets caused losses on mortgages it couldn't sell.

The seizure came after panicked customers withdrew more than $1.3 billion of deposits over 11 business days. The withdrawals followed comments in late June by U.S. Sen. Charles Schumer questioning IndyMac's survival.

Source: Reuters

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